General and Administrative Rate (G&A Rate)

The general and administrative (G&A) rate is the indirect cost pool rate applied to all contracts to recover the costs of managing the entire business enterprise, executive leadership, corporate finance, legal, human resources, contracts and compliance functions, and allowable business development costs, expressed as a percentage of the G&A allocation base (typically total cost input or a value-added base).

What is a G&A Rate?

G&A is the top layer of the indirect cost stack, applied after direct costs, fringe, and overhead have been accumulated. Unlike overhead (which benefits a specific operating division or facility), G&A costs benefit the entire company. This distinction drives the different allocation base: G&A is typically spread across all final cost objectives using a total cost input base (all allowable direct and indirect costs below G&A) or a value-added base (total cost input minus subcontract costs), ensuring corporate costs are allocated equitably whether a contract is labor-intensive or subcontract-intensive.

Common G&A cost components include: executive compensation allocated to indirect functions, corporate finance and accounting staff, legal and compliance costs, human resources, corporate facilities and IT infrastructure, bid and proposal costs (B&P), independent research and development (IR&D), and general corporate marketing. FAR 31.205-18 specifically defines allowable B&P and IR&D costs and the limits on their recovery through G&A.

Companies with multiple operating groups may allocate G&A first to the groups and then to individual contracts within each group. The G&A rate interacts with the contract's cost type in meaningful ways: on cost-type contracts, G&A is a passthrough reimbursable cost; on FFP contracts, G&A is baked into the firm price and the contractor bears any G&A variance versus proposal assumptions; on T&M contracts, G&A is embedded in the fixed billing rates.

Why the G&A Rate Matters for Government Contractors

G&A rate competitiveness separates winning contractors from also-rans on cost-type and T&M competitions. A 14% G&A rate versus a 10% rate is a meaningful price difference on a $50M contract. Companies reduce G&A rates primarily through revenue growth (spreading fixed corporate costs over a larger cost base) and B&P discipline (not pursuing losing opportunities that inflate the B&P pool without generating offsetting revenue). On large CAS-covered contracts, G&A rate disclosure and consistency requirements significantly constrain how G&A pools are structured.

Example

A $120M revenue defense contractor's annual G&A pool includes: executive compensation allocated to G&A ($3.1M), corporate finance and accounting staff ($2.2M), legal and contracts compliance ($1.4M), human resources ($1.1M), corporate facilities and IT ($1.8M), allowable B&P costs ($4.6M), and IR&D ($2.4M). Total G&A pool: $16.6M. Total cost input base (all contracts' direct + fringe + overhead): $104.5M. G&A rate: $16.6M / $104.5M = 15.9%.

Frequently Asked Questions

What is the difference between a total cost input base and a value-added base for G&A?

Under a total cost input (TCI) base, G&A is allocated as a percentage of all costs (direct labor, fringe, overhead, and other direct costs including subcontracts). Under a value-added base, subcontract costs and other purchased services are excluded from the base. The choice affects contractors with high subcontract volumes: a TCI base spreads G&A costs across subcontract pass-through, diluting the rate; a value-added base concentrates G&A recovery on the firm's own labor and overhead, typically resulting in a higher stated G&A rate that is applied to a smaller base. Both structures are acceptable to DCAA as long as the allocation is equitable and consistently applied.

Are bid and proposal costs always included in G&A?

B&P costs are allowable under FAR 31.205-18 up to amounts deemed reasonable. Unlike IR&D (which has a statutory ceiling for large businesses), B&P has no fixed dollar cap but is subject to reasonableness review. B&P costs must be for specific identified pursuits; general market analysis and strategic planning costs are not B&P. On CAS-covered contracts, the classification of costs as B&P versus G&A overhead is subject to CAS 410 requirements for consistent allocation of G&A expenses.

Can a contractor charge G&A directly to a specific contract?

No. G&A is by definition an indirect cost that benefits all contracts and cannot be specifically identified with any single one. Attempting to charge G&A costs directly to a single contract (for example, billing the CFO's salary directly to one large program) violates FAR 31.201-4 (Determining Allowability) and CAS 410. If specific corporate-level work is genuinely dedicated to a single contract, it should be charged as a direct cost with appropriate documentation, but then it is not G&A.

How do G&A rates affect pricing on subcontract-heavy contracts?

On contracts where a significant portion of costs are subcontract pass-throughs, the G&A allocation method matters significantly. Under a TCI base, a $10M subcontract generates approximately $10M × G&A Rate in additional G&A cost recovery for the prime. Under a value-added base, the subcontract is excluded from the G&A base and generates no G&A recovery. The prime's proposed handling fee on subcontract costs is the typical compensation mechanism on value-added base contracts. When evaluating the cost structure of subcontract-heavy proposals, understanding which G&A base the prime uses is essential for accurate cost comparisons.